Trader Warns "The Entire World Is Explained By 10-Year Yields"

Former fund manager and FX trader Richard Breslow has an uncomfortable message for the investing world today:

"It’s time to finally admit that fixed-income markets are the only ones capable of expressing an honest picture of the world.

And the picture they paint with 10-year Treasuries, bunds and JGBs at recession-level yields is something that can’t any longer be blithely explained away as some technical distortion. "

It doesn’t matter to -- or perhaps it is better to say it is crucially indicative of -- underlying sentiment, that no matter how much of this stuff profligate governments will be issuing, investors feel the urgent need to have them in their portfolio.

Via Bloomberg,

With all due respect to those positing much higher yields as a real risk given the hunky-dory view of the world from the large corner suite, we remain as mired in economic inequality as ever. With all of the threats that portends. And anxiety levels have not abated. I couldn’t care less what some statistic that anyone wishes to cite claiming that it isn’t true.

Dr. Lawrence Summers wrote an interesting article that is running today on the Bloomberg terminal. In it, he lays out the challenges political leaders must overcome to preserve in whole, or at least mostly, the post-war global Western hegemonic order.

In truth, we are sliding further and further away from achieving any of those goals. Suddenly locking in 3 percent yields doesn’t seem so counterintuitive.

Equities can go to the moon. With the sovereign wealth funds picking winners and losers among supposed competitors and putting public monies behind their choices, how far down is big tech really going to go? On the day that Apple hit its valuation milestone, I was looking at the list of owners of the shares and suddenly wasn’t nearly as impressed.

Buying back shares, touting “adjusted earnings” and substituting M&A for actual investment makes these markets great investments, but hardly indicative of economies putting the thoughts of future recessions out of everyone’s minds.

There were three stories I read yesterday that really got me going.

A great read about a well-deserved victory lap by Morgan Stanley for having called a month ago the big-tech correction. In it they say that, after making the out-of-consensus prediction, their phones “were not ringing”. Apparently, the pull of confirmation bias precluded clients from wanting to hear another opinion. Is it true that you can’t be fired if you maintain that everyone you talked to agreed with the position? Anyway, as the sell-off took place, “inbound traffic picked up considerably”. This story is indicative of so much.

The second story was about Facebook wanting to team up with banks and share information to offer customer-service products. The shares of the company and the financial sector as a whole rose. How quickly we all forget. I know the first question I would ask the next time a banking regulator testifies that we are being too harsh.

Lastly, I was reading the gruesome accounts of the diplomatic blow-up between Canada and Saudi Arabia. It was appalling that so much of the analysis focused on what this could cost in trade. Concluding, it was affordable. I’m sure this is not what Keynes meant when he argued about the primacy of economics in guiding the world forward.

Since it has been a day of rethinking things, I’ve got another. As one dollar bull to another. The charts just won’t be convinced this thing is going anywhere anytime soon. The trading range of DXY, with its multiple tops, is just too compelling to ignore.

And the broader Bloomberg Dollar Index looks like it has already decided the rally has played out for now. Back to the drawing board.


Manipuflation Wed, 08/08/2018 - 04:34 Permalink

My new AFRO bonds are the ticket.  They have really strong underlying assets such as diamonds, ivory and sand.  I am starting the yield at 15% per annum GUARANTEED.(for the first five days)  [not redeemable for one year]

lock-stick Adolfsteinbergovitch Wed, 08/08/2018 - 11:27 Permalink


•• Free This (ABOVE, in all his 7th grade glory - JACKASS  as new icon!)


•• Adolfsteinbergovitch ("I TORMENT THE WOMAN WHO SUCKS DICK!")


•• MoreSun (whacked, OH SO WHACKED!!)


....and all the while, the pathetic little SPAMMER sits in his leaky, moldy, smelly single wide in Western New York, surrounded by garbage and dirty clothes, trying to find his dick amidst rolls of fat, talking to his ACTION FIGURES and wondering where his life went.



In reply to by Adolfsteinbergovitch

Sudden Debt Wed, 08/08/2018 - 04:36 Permalink

It's not like there's a way back. As long as the system stays stable, we can still enjoy it.

If everything starts to correct, there will be very few people who will like what happens


But a nice inflationspike of about 75% would fix about everything 

Grandad Grumps Wed, 08/08/2018 - 05:24 Permalink

Nothing explains the entire world... especially a man made interest rate. There are correlations to some things, but not causation.

Fundamentals don’t matter in a fraud market. The only way to win is to not play. Awful hard to do these days.

To Hell In A H… Wed, 08/08/2018 - 05:39 Permalink

I was at a banking event held by the National Bank of Kenya last Saturday and they were selling bonds-treasuries, as well as getting affluent Kenyan diasporas' to invest in bonds and housing. The invite was also given to people interested in investing in Kenya. To date Kenya has not defaulted, but I pointed out the maths to those in charge of the pitch.

I stated, by his own words, that Kenya makes up the 40% shortfall in public spending, as 60% is in tax receipts, is made up via treasury-bond sales. I asked at returns of 12-14% per annum depending on when you purchased the bonds, how is this a sustainable model in the long term?

In short, I pointed out most countries including Kenya, are playing a game of bond market musical chairs, in a financing game of madness, on a completely unsustainable model. The 2 Indian and White Kenyan bond traders for the bank, couldn't even tell me what level of government debt the USSA had. That had no idea how much QE the EU, FED, or Bank of England had printed, as well as dumb on a number of ancillary questions.

You are talking about £55K a year analysts and by Kenyan standards, that is fucking good money. They are economic retards when it comes to real world economics and the fraudulent nature of the system, but I did get a good in. I was asked to by the black head of the department, would I like to be a consultant to his traders?

Yesterday I sign a consultancy agreement to speak to their traders in an advisory capacity. The 1 hour conversation I had with them last Saturday obviously impressed, but 60% of the information I gleaned was from ZH, regarding the utter shitfuck and rigged system we are in. The fact these traders did not know anything, was not what surprised me. It was that their source of information is main stream economic sources.

£18K per annum, for a 3.5 hour per week consultancy role, I did not even pitch for, in which I told them in our first official conversation, it is inevitable the bond market will collapse, which the analysts I spoke to gave no serious consideration. These late 20 something analysts have no joined up thinking. 

I asked them to explain the devaluing of the Turkish Lira, Iranian Rial and Venezuela Bolivar, as a natural occurrence due to their own economic policies, but when I pressed them on what fundamental economic principals have they flouted resulting in their currencies turning to shit, thus pushing up the interest rates on their bonds, none of them could answer. Outside of blaming Venezuela of socialism, they were completely stuck in explaining Turkey and Iran.

I gave them other examples and articles I copy, pasted and sent via email in PDF format to read and do you know what they came up with by the end of Tuesday? That the markets are rigged.

Money_for_Nothing To Hell In A H… Wed, 08/08/2018 - 07:29 Permalink

A country that doesn't import much can have a lot of debt. It's those darn foreigners wanting real wealth instead of funny money that is the problem. That is why closing the boarders and raising tariffs is a winning policy for the US AT THIS MOMENT IN TIME. The current US policy allows the US to inflate away all the foreign held debt. Of course having a large military helps. That way the US doesn't have to have a Gandhi or Nasser as leader (pacifist or military).

In reply to by To Hell In A H…

TechnoCaveman To Hell In A H… Wed, 08/08/2018 - 13:34 Permalink

    Good job. People living off the steady stream of government news are being fattened for the slaughter. Their God given brain and wide vision pruned down to the one branch or limb governments want to climb out on. 
    Look at the fundamentals and sustainability. How many are working. What is the price of energy. Where do supplies come from and where are the customers. What part of other peoples chains (no pun intended) do they participate in ? 
    A lesson as old as rocks - make enough off the top when providing for others and you will never go hungry. 
    Sadly the American dream of "each providing for the other" is being turned into communistic "support the upper crust" only. There is more to be made providing goods/services to the many than to just the rich. 

In reply to by To Hell In A H…

gmak Wed, 08/08/2018 - 06:10 Permalink

at first glance, I thought the headline was "Entire world is explained by 10-year olds".  I was expecting and editorial on the MSM.

farmboy Wed, 08/08/2018 - 10:07 Permalink

The article of mr Summers is interesting but misses the elephant in the room. That is that the USA has weaponised financial markets for its own benefit in geopolitics and also that the USA is ultimately an oligarchy and not a democracy. So it benefits oligarchs and not the common man.

It is obvious that this has gone wrong and now powers will be unleashed that cannot be controlled.

rf80412 Wed, 08/08/2018 - 12:03 Permalink

When Greece was first melting down, I remember someone using 10 year yields to explain why Japan wasn't going to blow up anytime soon.  Japan had a higher debt-to-GDP ratio than Greece, but when you graphed that alongside yields on 10 year bonds, the two countries moved to opposite ends of the graph.  Japan's debt burden was growing relative to its economy much slower than Greece's was.